Q2 2024 Shoals Technologies Group Inc Earnings Call

Wheels.

Speaker Change: Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the Companys second quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. Please note.

But the slide you see here are available for download from the Investor Relations section of our website at investors Dot Shoals Dot com.

Before we begin I want to remind our audience that shows will be hosting its first analyst day for research analysts and institutional investors on September 5th in Nashville, Tennessee.

Our extended management team will present, our strategy growth drivers and investment thesis.

Speaker Change: Formal presentations will be followed by a factory tour and evening reception.

Speaker Change: If you're interested in joining us in person. Please reach out to me directly at investors at Shoals Dot com.

A live webcast will also be made available for those wishing to join virtually.

With that let me turn the call over to Brendan.

Unnamed Speaker: Thank you, Matt, and good afternoon, everyone. I'll begin with the second quarter highlights, followed by an overview of market trends, and then discuss our updated outlook. Finally, I'll wrap up with some customer highlights before handing the call over to Dominic, who will review our financial results for the quarter and the 2024 outlook. And as of June 2024, U.S. Energy and Information Administration Form 860M on-time installs and gigawatts are at their lowest levels in 18 months.

Unnamed Speaker: We have no indication that these delays are unique to Shoals as customers have been candid in their feedback and share market expectations with us in real time. Moving to International. These solutions are designed to simplify project design, reduce risk, accelerate timelines, and cut costs while helping customers meet sustainability goals. Turning to our remediation efforts related to shrinking back on wire purchased from Prismian, a former vendor, our potential range of exposure has not changed this quarter.

Brendan: Thank you, Matt and good afternoon, everyone I'll begin with second quarter highlights followed by an overview of market trends and then discuss our updated outlook.

Unnamed Speaker: The average lead time from revenue recognition to COD is 13 months, consistent with what we've shared with you in the past, but in some cases, it's more than two years, and some projects go live in a short time after installing our solution, also consistent with past observations.

Brendan: Support our positive long term outlook, despite near term uncertainty.

Brendan: While short term volatility is challenging for all of US we remain focused on what we are building for the long term a more resilient consistent and diversified business the.

Brendan: The impact of todays efforts will be realized in time and we continue to believe that we are uniquely positioned to win in the marketplace. We.

Brendan: We will continue to focus on increasing our wallet share of domestic epc's expanding into previously unserved market segments, adding new products to our portfolio and moving into attractive geographies outside of North America.

Brendan: Moving to international.

Brendan: In addition to more than 130 customer meetings, we met with many of you at inner solar in Germany in June.

Brendan: There we unveiled our most comprehensive international product suite to date launching new solutions for unobstructed Rose Agra solar and north South configurations, complementing our east west offerings.

Brendan: Our new prefabricated plug and play solutions eliminate the need for installation piercing connectors, helping ensure durability in extreme conditions and protecting the long term investment of developers.

Brendan: Lineup features globally certified versions of our U S products and innovations like Super jumper trench, BLA mini BLA and smart combining.

These solutions are designed to simplify project design reduce risk and accelerate timelines and cut costs, while helping customers meet sustainability goals.

Unnamed Speaker: Changes that are being put in place to prepare us for the market growth we see ahead and the expansion we plan on driving. The changes we've made to our sales structure, product offering, and marketing efforts are designed to do just that. In the last year, we've built a formal product development function staffed with experienced electrical engineers who have already launched more new products than in the previous three years. We've improved and refined a marketing function that is capturing the customer voice, ensuring we meet their needs, and is aligned with future market opportunities.

Brendan: With that we have leading market share.

Brendan: What might surprise you is that we've achieved that while addressing only a subset of the market approximately 70% in fact.

That 30% belonged to customers, we either did not do business with all the projects that were smaller in size.

Brendan: That opportunity that expansion of our served addressable market could be in excess of 30 gigawatts of capacity in the next three years alone According to industry estimates.

Brendan: Our goal going forward is to ensure all customers have the products and service they need to be successful in the marketplace. The changes we've made to our sales structure product offering and marketing efforts are designed to do just that.

Brendan: In the last year, we built a formal product development function staffed with experienced electrical engineers, who have already launched more new products than in the previous three years, we've improved in our refining and marketing function that is capturing the customer voice, ensuring we meet their needs and is aligned with future market opportunities.

Brendan: <unk>.

Our new sales go to market pod strategy Leverages, our proven playbook to scale, our business, while improving touch points each.

Brendan: Each of these critical functions are led by new passionate business leaders, who bring a wealth of experience process and strategy to shoals.

Brendan: Early indication is that these commercial initiatives, we're executing on today are already making a difference we can see it in the MSA expansion like bloggers and other new commercial agreements with new customers. We've signed this year and the composition of our awarded order book and the conversations with our customers I've been having.

Unnamed Speaker: We can see it in the MSA expansions like Blattner's and other new commercial agreements with new customers we've signed this year and the composition of our awarded order book and the conversations with our customers I've been having this year. We are improving our customer service to existing accounts while expanding our offering in new market segments like CC&I, data centers, and battery storage and entering new geographies with new EPCs.

Brendan: This year.

Brendan: We are improving our customer service to existing accounts, while expanding our offering into new market segments like C&I datacenters in battery storage and entering new geographies with new EPC.

Brendan: We believe that what we're doing today will set us up for success in the years to come but we like what we're seeing already and soda customers.

Brendan: With that I'll turn it over to Dominic <unk>, who will discuss our second quarter financial results and our outlook for the remainder of the year Dominic.

Dominic: Thanks, Brandon and good afternoon to everyone on the call.

Dominic: Turning to our financial results second quarter net revenue declined 16, 7% to $99 $2 million year over year, but increased nine 3% sequentially.

Dominic: The year over year decline in net revenue was driven by project push outs, which resulted in lower demand for our products and domestic utility scale solar projects.

Brendan: Gross profit decreased to 40.0 million compared to $55 million in the prior year period.

Unnamed Speaker: Gross profit as a percentage of net revenue was 40.3% compared to 42.4% in the prior year period, primarily due to higher labor costs and lower fixed cost absorption. Adjusted EBITDA was $27.7 million compared to $48.2 million in the prior year period. Adjusted EBITDA margin was 27.9%, compared to 40.4% a year ago, driven largely by lower sales and adjusted gross margin.

Brendan: Profit as a percentage of net revenue was 43% compared to 42, 4% in the prior year period, primarily due to higher labor costs and lower fixed cost absorption.

Brendan: General and administrative expenses were $19 2 million compared to $16 7 million during the same period in the prior year.

Dominic: The year over year increase in general and administrative expenses was primarily related to legal fees for the patent infringement and wire insulation shrink back matters and planned increases in payroll expense.

Dominic: Approximately $1 4 million of G&A expense was specifically related to the wire insulation shrink back litigation.

Dominic: Net income was 11 $8 million compared to $18 9 million during the same period in the prior year.

Dominic: Adjusted EBITDA was $27 $7 million compared to $48 2 million in the prior year period adjusted.

Dominic: Adjusted EBITDA margin was 27, 9% compared to 44% a year ago, driven largely by lower sales and adjusted gross margin.

Dominic: Adjusted net income was $17 $8 million compared to $31 $2 million in the prior year period.

Dominic: Cash flow from operations was $37 $8 million, while capital expenditures were 2.0 million.

Unnamed Speaker: Strengthened cash flow from operations was driven by an improvement in working capital, more specifically a reduction in receivables. During the second quarter, we spent $5.3 million in cash for remediation efforts, and we had a remaining warranty liability on our balance sheet of $46.0 million related to the shrinkback matter as of June 30th. Our balance sheet remains very strong, and we ended the quarter with net debt to adjusted EBITDA of 1.1 times, which is down from 1.5 times a year ago and a significant improvement from 4.4 times as of Q1 2022.

The strength in cash flow from operations was driven by an improvement in working capital and more specifically a reduction in receivables.

Dominic: As you likely read our announcement in June our board approved our first share repurchase program up to $150 million with authorization to repurchase through December 31 of 2020 fives.

Dominic: This included a $25 million of an accelerated share repurchase which was launched in June and completed just last week in the third quarter.

Dominic: In total we retired approximately $3 9 million shares at an average price of just under $6 40 per share.

Dominic: We funded the initial ASR using cash on hand in June which allowed us to quickly allocate capital towards and the opportunity that we believe provides an attractive long term returns for shareholders as.

Dominic: As we said on last quarters earnings call. We do not believe the current share price reflects the long term value we are creating and so we expect this authorization may be used opportunistically overtime.

Dominic: We will continue to evaluate investment opportunities to deploy the strong free cash flow. We see ahead, which first and foremost includes growing our core business, but may also include M&A.

Dominic: We will prioritize those opportunities with the most attractive return profile that aligns with our strategy.

Dominic: Moving to wire insulation shrink back as Brandon mentioned based on our current knowledge and assumptions. The remediation range remained at $59 $7 million on the low end and $184 $9 million at the high end.

Dominic: During the second quarter, we spent $5 $3 million in cash for remediation efforts and had a remaining warranty liability on our balance sheet of 46.0 million.

Dominic: Related to the shrink back matter as of June 30th.

Dominic: The current portion of the remaining liability is now $29 8 million.

Dominic: As a reminder, this represents the amount of cash we estimate we will consume during the next four quarters. As we continued remediation efforts and does not reflect any potential recovery from presume or increased reserves, if our assumptions or knowledge of facts change.

Dominic: This figure is more than covered by our expected free cash flow over the same period.

Dominic: Our balance sheet remains very strong and we ended the quarter with net debt to adjusted EBITDA of one one times, which is down from 1.5 times, a year ago and a significant improvement from four four times as of Q1 2022.

Dominic: Optimizing our balance sheet is crucial to maximizing financial flexibility and long term growth.

Dominic: By carefully managing our assets and liabilities, we can ensure efficient use of capital reduce costs and position the company to seize new opportunities as they arise.

Unnamed Speaker: Turning to backlog and awarded orders. As of June 30, 2024, we had $642.3 million in backlog and awarded orders, an increase of 18% year-over-year as the company added $126 million to backlog and awarded orders during the period. As you would expect in a period of market uncertainty, there will be give and takes as we make our way through the second half of the year, but our intention is to give you more clarity in the coming quarter.

Dominic: Turning to backlog and awarded orders as of June 32024, we had $642 $3 million in backlog and awarded orders an increase of 18% year over year as the company added a $126 million to backlog and awarded orders during the period.

Dominic: As we have previously discussed some of our international orders have longer lead times than domestic orders and we are also winning domestic jobs that extend or had been delayed beyond our historical revenue cycle of nine to 13 months to realize revenue from awarded orders.

Dominic: As of June 30th approximately $465 million of our backlog and awarded order projects have plans delivery dates in the coming four quarters with the remaining $177 million beyond that we.

Dominic: We are halfway through 2024 and are comfortable where we currently sit for next year. Our sales team is encouraged by the level of customer engagement and projects continue to come into our awarded orders for 2025 at a reasonable pace.

Dominic: As you would expect in a period of market uncertainty there will be gives and takes as we make our way through the second half of the year, but our intention is to give you more clarity in the coming quarter.

Dominic: Turning now to the outlook.

Dominic: As a result of the current macroeconomic and industry uncertainty, we will continue to provide quarterly guidance for the remainder of the year.

Dominic: Based on current business conditions business trends and other factors the company now expects.

Unnamed Speaker: Third quarter revenue is expected to be in the range of $95 million to $105 million, and fourth quarter revenue is expected to be in the range of $85 million to $105 million. This incremental change is reflective of the industry delays we're experiencing. I want to stress that we believe these changes reflect the timing of revenues, not lost projects. Adjusted EBITDA is expected to be in the range of $96 million to $110 million, and cash flow from operations is expected to be in the range of $62 million to $82 million.

Dominic: Third quarter revenue to be in the range of $95 million to $105 million.

Dominic: Third quarter, adjusted EBITDA to be in the range of $25 million to $30 million.

Dominic: Fourth quarter revenue to be in the range of $85 million to $105 million and fourth quarter adjusted EBITDA to be in the range of $22 million to $31 million.

Dominic: These figures imply that for the full year 2024, the company now expects revenue to be in the range of $370 million to $400 million.

Dominic: This incremental change is reflective of the industry delays were experiencing.

Dominic: I want to stress that we believe these changes reflect the timing of revenues not loss projects.

Dominic: Adjusted EBITDA is expected to be in the range of $96 million to $110 million.

Dominic: Adjusted net income to be in the range of $62 million to $76 million.

Dominic: Cash flow from operations to be in the range of $62 million to $82 million.

Dominic: Capital expenditures to be in the range of 15 million to $20 million.

Dominic: And interest expense to be in the range of 15 million to $20 million.

Dominic: With that I'll turn it back over to Brendan for closing remarks.

Brendan: Thank you Dominic I would like to close by providing some additional color on why we remain so positive on the markets in which we operate and the transformation you're seeing at Shoals.

Speaker Change: Energy production is not meeting demand that much is clear.

Speaker Change: It is not clear yet is what is going to be done to solve that problem.

Unnamed Speaker: AI requires an enormous amount of power, and we believe the data center operators who are in an AI arms race are struggling to meet their net zero goals. And it's not just the data center operators. You might be among the 2.6 million people in Texas without power for days following Hurricane Beryl last month.

Speaker Change: AI requires an enormous amount of power and we believe the data center operators, who are in an AI arms race are struggling to meet their net zero goals and it's not just the data center operators you might be among the $2 6 million people in Texas without power for days following hurricane barrel last month.

Dominic: More robust grid is critical.

Unnamed Speaker: A more robust grid is critical. It's getting worse, not better. All of us see more electric vehicles on the road today, and while we can argue about the rate of adoption, we haven't seen anyone arguing that it's up to the right.

Speaker Change: Worse, not better all of us see more electric vehicles on the road today and while we can argue the rate of adoption, we havent seen anyone arguing that it's up into the right.

Unnamed Speaker: We believe the electrification of transportation is inevitable, and it will strain the grid. No matter where you look, the trends we are embracing require more power, not less. We also know that solar power provides the most compelling economic... It's clean, accessible, and often the fastest to bring online.

Dominic: We believe the electrification of transportation is inevitable and it will strain the grid no matter, where you look the trends we are embracing require more power not less we also know that solar power provides the most compelling economics it's.

Dominic: It's clean accessible and often the fastest to bring online certainly as compared to nuclear which estimates say it could take a decade or more to stand up and certainly more than coal given the regulatory hurdles you need to navigate.

Unnamed Speaker: Certainly, as compared to nuclear, which estimates say could take a decade or more to stand up, and certainly more than coal, given the regulatory hurdles you need to navigate. We know Shoals brought to market the eBoss category for U.S. utility-scale solar. We have an exceptional history of high-quality, custom-engineered solutions for our EPC customers. The rest of the world is navigating many of the same issues we are here, and while cheap labor is readily available, experienced electricians and engineers are not.

Shoals: We know shoals brought to market the <unk> category for U S utility scale solar we have an exceptional history of high quality custom engineered solutions for our EPC customers.

Speaker Change: Rest of the World is navigating many of the same issues. We are here and while cheap labor is readily available experienced electricians and engineers are not.

Unnamed Speaker: Those EPCs are in need of many of the same solutions we provide today, and those discussions have already begun. We know that there are large portions of the U.S. utility and distributed generation market that have not been served by Shoals. We also know how meaningful the international market opportunity is for us, and we know that operational excellence, including productivity and efficiency optimization, is now top of mind. These market opportunities, when paired with the strong foundation we have and the new capabilities, talent, and products we are introducing, set us up well for a successful future.

Speaker Change: Those <unk> are in need of many of the same solutions, we provide today and those discussions have already begun.

Dominic: We know that there are large portions of the U S utility in distributed generation market that have not been served by Shoals. We also know how meaningful the international market opportunity is for us.

Dominic: And we know that operational excellence, including productivity and efficiency optimization is now top of mind.

Dominic: These market opportunities when paired with a strong foundation, we have in the new capabilities talent and products we are introducing.

Wheeler: Let us up well for a successful future Wheeler.

Unnamed Speaker: We look forward to introducing those team members, discussing those capabilities, and letting you hear directly from our customers at our Investor Day why Shoals is the partner they have chosen to do business with. Operator, we are now ready to take questions.

Dominic: We look forward to introducing those team members discussing those capabilities and letting you hear directly from our customers at our Investor day, why Shouldnt the partner they have chosen to do business with.

Dominic: I want to thank our customers and shareholders for their trust.

Dominic: And our employees for their hard work.

Speaker Change: Operator, we're now ready to take questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset.

Speaker Change: Pressing the Star Keys My no ma'am please poll for questions.

Operator: One moment, please, while we poll for questions. The first question is from Brian Lee from Goldman Sachs. Please go ahead.

Speaker Change: The first question is from Brian Lee from Goldman Sachs. Please go ahead.

Brian Lee: Hey, guys, good afternoon. Thanks for taking the questions.

Brian Lee: Hey, guys. Good afternoon, thanks for taking the questions.

Brian Lee: I guess the first one I had was just on, you know, over the past three months. I guess what has been the biggest incremental change here that's underscoring the revised outlook again downward for the second straight quarter? I guess we understand there's delays out there, and your peers have been talking about how the environment's fluid, but it seems like the magnitude is maybe a bit more pronounced for you guys in terms of what it means for numbers versus others.

Brian Lee: First one I had was just on.

Brian Lee: Over the past three months I guess.

Speaker Change: What has been the biggest incremental change here.

Speaker Change: Yeah, that's underscoring the.

Speaker Change: Our revised outlook again downward for the second straight quarter I guess.

Speaker Change: Understand there's delays out there and your peers have been talking about how the environment is fluid, but it seems like the magnitude.

Speaker Change: Is maybe a bit more pronounced for you guys in terms of what it means to numbers versus others. So just trying to reconcile why why that might be the case, what's changed over the past three months for you specifically and then.

Brian Lee: So just trying to reconcile why that might be the case, what's changed over the past three months for you specifically, and then maybe any comments you can share also on just the competitive landscape because I know there's, especially with this revised outlook, going to be incremental concerns around that potentially being an idiosyncratic factor in what's causing this update.

Speaker Change: Maybe any comments you can share also on just the competitive landscape because I know, there's especially with this revised outlook going to be incremental concerns around that potentially being a idiosyncratic factor in and what are what is causing this update and I had a follow up.

Dominic: Yeah.

Unnamed Speaker: Brian, thanks. Good questions. A lot to unpack there, I guess, to tackle the first one first. Really, the big picture for us, quarter to quarter, is it's more of the same. We talked about $50 million of project pushouts in the first quarter. We had about $40 million this quarter. So the short-term volatility, I know it's frustrating; it's frustrating for us. Again, I'd remind everybody, these are not lost projects. These are projects that are pushed out to the right. As it relates to... you know, the discussion around or the question around the competitive landscape.

Dominic: Brian. Thanks. Good question has a lot to unpack there I guess to tackle the first one first.

Brian: Really the big picture for us quarter to quarter as it's more of the same.

Brian: We talked about $50 million of project push outs in the first quarter, we had about $40 million. This quarter. So the short term volatility I know, it's frustrating it's frustrating for us.

Brian: Again, I'd remind everybody. These are not lost projects. These are projects that are pushed out to the right.

Brian: As it relates to.

Brian: The discussion around or the question around the.

Dominic: The competitive landscape.

Unnamed Speaker: I feel better than ever about our commercial execution. We showed backlog and awarded order growth to record levels this quarter of $624 million, adding $1 hundred and twenty six million dollars of backlog and awarded orders, and a strong book to bill ratio of 1.3. So I like how we're executing.

Dominic: I feel better than ever about our commercial execution.

Dominic: We shared backlog and awarded order growth to record levels this quarter of $642 million.

Dominic: Adding $126 million of.

Dominic: Backlog and awarded orders and.

Dominic: A a strong book to bill ratio of 1.3.

Dominic: So I like how we're executing.

Unnamed Speaker: I think our customers like how we're executing, as evidenced by our new extension to the Blattner agreement of 12 gigawatts, which is unbelievably exciting for this organization. What is also extremely exciting about our commercial execution is the quality and diversity of our order book. If you think about our order book last year this time, prior period Q2, About 77% of our backlog and awarded orders were made up of our top 10 customers.

Dominic: Our customers like how we are executing as evidenced by our new extension to the Blattner agreement of 12, Gigawatts, which is unbelievably exciting for for this organization.

Dominic: What is what is also extremely exciting about our commercial execution.

Dominic: Is the quality and diversity of our order book.

Dominic: If you think about our order book last year. This time prior period Q2.

Dominic: About 77% of our backlog and awarded orders was made up of our top 10 customers that number is now 61%.

Unnamed Speaker: That number is now 61%. I talked about in previous calls, you know, we had a handful of customers where we lost wallet share, and we needed to improve. $130 million of our backlog and awarded orders are now related to that customer subset. So, I'm really happy with commercial execution. I think, you know, the challenges that we face are not unique to Shoals; they're market-driven challenges. And again, I couldn't be happier with how we're executing on the customer side. I think you have a follow-up question.

Dominic: I talked about in previous calls you know, we had a handful of customers, where we've lost wallet share and we needed to improve.

Dominic: $130 million of our backlog and awarded orders is now related to that customer subset.

Dominic: So really happy with commercial execution.

Dominic: I think you know.

Dominic: The challenges that we face are not unique to shows are market driven challenges and again I couldn't couldn't be happier with how we're executing on the customer side.

Speaker Change: I think you have a follow up.

Brian Lee: Yeah, no, that was super helpful, Colin. I guess, you know, given your comments between Q1 and Q2, it's almost $100 million of, you know, push outs, not lost projects. Do you have indications from your customers that that's going to, you know, progress in 25; you will actually be asked to deploy and ship that product in 2025, or what sort of visibility into the recapture of that, you know, close to $100 million of pushouts you've seen through the first part of this year? Thanks, guys.

Speaker Change: Yeah, No that was super helpful color I guess.

Speaker Change: Given your comments between Q1 and Q2, it's almost $100 million of.

Speaker Change: Push outs not lost projects do you have indications from your customers.

Speaker Change: Is that that's going to progress in 2005, you will actually be asked to deploy and ship that product in 2025, or what sort of visibility into the recapture of that.

Speaker Change: Close to $100 million of push outs, you've seen through the first part of this year. Thanks guys.

Unnamed Speaker: Yeah, the project pushouts, look, as I've talked about in the past, a myriad of reasons, but what we hear probably most commonly is site permitting and interconnection challenges. So these projects, we look at everything on a project by project basis. We have our customers and construction schedules, in many cases, and we see these projects pushing out into 2025.

Speaker Change: Yes, the project push outs hook as I've talked about in the past myriad of reasons.

Speaker Change: What we hear probably most commonly as site permitting.

Speaker Change: Interconnection challenges.

Speaker Change: So these projects we look at everything on a project by project base basis, we have are our customers and construction schedules and in many cases and we see these projects pushing out into 2025 now.

Brian Lee: You know, I think I've been asked this question in the past, you know, is 1 plus 1 going to equal 2 for 2025? We see these challenges, you know, still persisting into the back half of the year. There are project delays, and those are a challenge for us. So, you know, we will continue to monitor those projects on a project-by-project basis as we always do, Brian.

Speaker Change: I think I've been asked this question in the past is one plus one is going to equal two for 2025.

Speaker Change: We see these challenges still still persisting into into the back half of the year.

Speaker Change: There are project delays and those are a challenge for us so.

Speaker Change: We will we will continue to monitor.

Speaker Change: Those projects on a on a project by project basis, as we always do Brian.

Speaker Change: Okay.

Unnamed Speaker: Alright, thanks a lot guys, I'll pass it on.

Brian Lee: Alright, Thanks, a lot guys I'll pass it on.

Brian Lee: Thanks, Brian.

Operator: The next question is from Mark Strouse from JPMorgan Chase & Co. Please go ahead.

Speaker Change: The next question is from Mark Strouse from Jpmorgan Chase <unk> co. Please go ahead.

Mark Strouse: Yes, good afternoon. Thank you very much for taking our questions. I'm curious if you can discuss the ASP trends for these new orders that you're booking and whether we should think of your gross margins kind of remaining in that low to mid-40s range that you've talked about previously. Just kind of trying to feel out if any of these headwinds, be it industry or company specific, are impacting your pricing power.

Mark Strouse: Yes. Good afternoon. Thank you very much for taking our questions.

Mark Strouse: Curious if you can discuss the ASP trends for these new orders that youre booking.

Speaker Change: And whether we should think of your gross margins kind of remaining in that low to mid forties range that you've talked about previously.

Speaker Change: Kind of trying to feel out if any of these headwinds be at industry or company specific.

Speaker Change: If those headwinds are impacting your pricing power and then I've got a follow up as well. Thank you.

Unnamed Speaker: Yeah, thanks, Mark. Thanks for the question. Good to hear from you. Yeah, no changes to our guided margin of 40% to 45%. So we still feel good about those numbers moving forward in this environment and in environments in the future.

Speaker Change: Yeah. Thanks, Mark Thanks for the question good to hear from you.

Speaker Change: No no changes to our guided margin of 40% to 45%. So we still feel good about about those numbers moving moving forward.

Speaker Change: In this environment and environments in the future.

Unnamed Speaker: And then just a quick follow-up to clarify, the 2Q bookings, does that include anything from this new Blattner agreement? And then, if you're able to, are you able to say how much of the original 10 gigawatt MSA with Blattner is outstanding? Yeah, so just for a point of clarification on how we do things.

Speaker Change: Okay, and then just a quick follow up to clarify the <unk> bookings does that include anything from this new blattner agreements.

Speaker Change: And then if you're able to are you able to say how much of the original 10 gigawatt MSA with blattner is outstanding.

Unnamed Speaker: Yeah, so just for a point of clarification on how we calculate backlog and awarded orders, because I do think it varies from company to company amongst our peer set. Backlog awarded orders are calculated when we've got a verbal commitment from the customer, the EPC, that they have won the project and we have a substantial amount of engineering design work done. So, in the case of Blattner and this new agreement, none of the new 12 gigawatts would be included in our backlog and awarded orders because these are projects out in the future in which they haven't yet won, nor have we started designing.

Speaker Change: Yes, so just for point of clarity on how we calculate backlog and awarded orders because I do think it varies from company to company amongst our peer set.

Speaker Change: Backlog awarded orders.

Speaker Change: Our calculated when we've got a verbal commitment from the customer the EPA say that they have won the project and we have a substantial amount of engineering design work.

Speaker Change: So in the case of Blattner. This new agreement none of the new 12, Gigawatts would be included in our backlog and awarded orders because these are projects out into the future and which they haven't yet one nor we have started designing.

Unnamed Speaker: So, although we've got, you know, an agreement in place, it is not included in our backlog and awarded orders. As far as the original agreement, we'll provide..., you know, specifics, but you can think of that as maybe at the halfway point.

Speaker Change: So although we've got an.

Speaker Change: An agreement in place. It is not included in our backlog and awarded orders.

Speaker Change: As far as the original agreement.

Speaker Change: We'll provide.

Speaker Change: You know specifics, but you can think of that as maybe at the halfway point.

Speaker Change: Okay understood. Thank you very much.

Mark Strouse: Thanks Mark.

Operator: The next question is from Jordan Levy from Truist. Please go ahead.

Speaker Change: The next question is from Jordan Levy from Truest. Please go ahead.

Jordan Levy: Hey, thanks. It's Mo, Uncle Jordan.

Jordan Levy: Hey, Thanks Jordan.

Jordan: Jordan two questions here.

Jordan: First of all in the press release in the press release, you mentioned there are changes being made in our planning process this year and next.

Jordan Levy: I have two questions here. First, in the press release you mentioned there are changes being made in the planning process for this year and next. I know it's still too early to give guidance for 2025, but how are you thinking about activity levels based on your current commercial activity? Thanks, and I have a follow-up.

Jordan Levy: I know, it's still too early to give guidance for 2025, but how are you thinking about activity levels.

Speaker Change: On your current commercial activity and.

Speaker Change: And I have a follow up.

Unnamed Speaker: Sure. Yeah, as I mentioned during Brian's question, we're very pleased with our commercial execution. Quoting still remains at an all-time high. We're excited that our backlog and awarded orders have reached record levels, and we love a 1.3 book-to-bill ratio. So, you know, we feel very strongly about how we're executing our new, you know, we've got some new commercial strategies, and new teammates. And I think we're doing quite well in that area.

Speaker Change: Sure Yeah as I mentioned.

Speaker Change: During Brian's question, we're very pleased with our commercial execution our.

Speaker Change: Quoting still remains at an all time high we're excited that our backlog and awarded orders have reached record levels and we love We love a one three book to Bill ratio.

Speaker Change: So.

Unnamed Speaker: As far as 2025 goes, given the level of volatility with these projects and the relative uncertainty around delays, it's just too early to call the ball on 2025, so I'm not going to do that.

Speaker Change: We feel very strongly about how we're executing our new.

Speaker Change: Got some new commercial strategies, new teammates and I think we're we're doing quite well in that area as far as 2025 goes given the level of volatility with these projects relatively relative uncertainty around delays.

Speaker Change: It's just it's just too early to call the ball on 2025, so I'm not going to do that.

Speaker Change: Do you have a follow up.

Jordan Levy: Sorry, I was on mute. Yeah, I mean, it's great to see international continue to ramp and increase as a percentage backlog. So what dynamics are you seeing in those markets? I mean, Africa, Latin America, Middle East, like you just mentioned, and how does that differ from what you're seeing in the US in terms of project slowdowns?

Speaker Change: Sorry, I was on mute, yes, I mean, it's great to see international attempting to ramp and increase as a percentage of backlog. So what dynamics are you seeing in Dallas markets I mean Africa.

Speaker Change: Latin American metal use like you just mentioned and how does that differ from what you're seeing in the U S and tell myself projects slow down.

Unnamed Speaker: Thanks.

Speaker Change: Yeah.

Speaker Change: For the international business that we've got book today, I would say.

Unnamed Speaker: Yeah, for the international business that we've got booked today, I would say, you know, large projects, and longer sales cycles. As you can imagine, where these projects are just, you know, construction at its core is not as easy as it might be in a state here in the US. So, you know, longer project cycles is probably the biggest thing to point out.

Speaker Change: Large projects longer sales cycles.

Speaker Change: As you can imagine or these projects are just construction at its core is.

Speaker Change: Not as easy as it might be in a state here in the U S. So.

Speaker Change: Longer project cycles as probably.

Speaker Change: The biggest thing to point out.

Unnamed Speaker: Look, we're excited about our international market opportunity. As I mentioned in the prepared remarks, 63 gigawatts of opportunities. We've got a new leader for that business. We launched, you know, the largest suite of products we've ever launched at one time just at Intersolar here in June, and the feedback we've gotten from customers has been fantastic. So I like our chances of developing organic growth in our focus local markets. So, more to come on international markets, but great progress being made. Okay, next question. The next question is from John Wyndham of...

Speaker Change: Look we're excited about our international market opportunity.

Speaker Change: As I mentioned in the.

Speaker Change: In the prepared remarks, 63 gigawatts of opportunities.

Speaker Change: We've got a new leader for that business, we have launched.

Speaker Change: The largest suite of products, we've ever launched one time just in our solar here in June and the feedback we've gotten from customers has been fantastic.

Speaker Change: No.

Speaker Change: I like our chances in developing.

Speaker Change: Developing organic growth in our focused local markets.

Speaker Change: So more to come on international but great progress being made.

Speaker Change: Okay next question.

Operator: The next question is from John Wyndham from UBS; please go ahead. Hey, great. Thanks for taking the questions.

Speaker Change: The next question is from Jon Windham from UBS. Please go ahead.

Jon Windham: Hey, great. Thanks for taking the questions.

Jon Windham: I was hoping you could just help bridge the gap on I think you had mentioned $40 million pushed out of 2024 to.

Jon Windham: 2025, However, I think the total revenue call. It was more like $70 million to $90 million is that just go get business, that's not going to happen now just if you could help bridge that really appreciate it. Thanks.

John Wyndham: Yeah, thanks, John. Yeah, so exactly $40 million pushed out into 2025. Look, this volatility in the marketplace has made it difficult for us to close a typical book and turn business within the year. So, I mean, you hit the nail on the head, and that's what gets you to the numbers that you mentioned, just a challenging volatile market. But again, you know, pointing out in the project business that those have pushed out. Those are still good projects for us. Just to reiterate, no projects were canceled in the quarter, just pushed out to the right. I appreciate it.

Speaker Change: Yes, Thanks, John Yeah, So exactly 40 million pushed out into 2025 and.

Speaker Change: Look.

Speaker Change: This volatility in the marketplace has made it difficult for us to close typical book and turn business within the year. So I mean, you hit the nail on the head and Thats what gets you.

Speaker Change: Due to the numbers that you mentioned, just a challenging volatile market, but again.

Speaker Change: Pointing out on the project business.

Speaker Change: <unk>.

Speaker Change: That have pushed out those are still good projects for us.

Speaker Change: Just to reiterate no projects canceled in the quarter.

Speaker Change: Just pushed out to the right.

Speaker Change: Okay.

Speaker Change: Appreciate it.

Speaker Change: Thank you. The next question is from Colin Rusch of Oppenheimer. Please go ahead.

Unnamed Speaker: Thank you. The next question is from Colin Rusch of Oppenheimer. Please go ahead. Thanks so much. Can you talk about what your win rate was versus quotation activity during the quarter and how that compares to where you've been historically?

Colin Rusch: Thanks, So much can you talk about what.

Colin Rusch: What your win rate was first quotation activity during the quarter and how that compares to where you've been historically.

Colin Rusch: Yeah, Colin, we have not good to hear from you on we've not disclosed our win rate in the past. I'm not going to do that today. What I will say, though, is that we identified that approximately 30% of the total available market of US utility scale solar was going basically, you know, underserved by Shoals in the past. That was either due to us not being aligned with one specific customer, whom we are now aligned with, and a group of customers that have just gone underserved. So, look, I think Shoals has historically had a strong win rate on jobs.

Colin: Yes collyn.

Speaker Change: Not good to hear from you want we have not disclosed our win rate on the path not going to do that today.

Speaker Change: What I, what I will say, though.

Speaker Change: We talked about is we have identified that approximately 30% of the total available market of U S utility scale solar.

Speaker Change: I was going.

Colin: Basically.

Colin: You know underserved by shows in the past that was either due to to us not being in line with with one specific customer when.

Colin: And we are now aligned with us.

Colin: And a group of customers that have just gone underserved. So look I think our shoals has had historically a strong win win rate on jobs.

Colin: My focus now is maintaining that win rate.

Unnamed Speaker: My focus now is maintaining that win rate and hopefully applying it to this new segment of the market, approximately 30%, that over a period of three years will represent 30 gigawatts of opportunity for us. You know, I look for the batting average to stay strong, but also the plate appearances to increase for those baseball fans out there. So again, we're excited about our commercial execution. And then in Europe, obviously, it's a nice start on the gate with the new products.

Colin: And hopefully hopefully applying it to this new segment of the market approximately 30% that over.

Colin: A period of three years will represent 30 gigawatts of opportunity for us so.

Colin: You know I look for the batting average to stay strong, but also the plate appearances doing inquiries for those baseball fans out there.

Colin: So so again, we're excited about our commercial execution.

Speaker Change: I appreciate it and then in Europe, obviously, it's a nice nice try out of the gate with the new products can you talk about whether you're adding incremental customers here are these existing customers, where you're just actually kind of like being Oklahoma with them on your products or in their products because of the product configurations.

Unnamed Speaker: Can you talk about, you know, whether you're adding incremental customers here or these existing customers where you're just actually finally getting over the hump with them on new products or new projects because of the product configuration? Yeah, the goal for us, Colin, is to add new customers, right? That's the point of localizing this product offering and really the aggressive push to develop new products in the marketplace. Historically

Speaker Change: Yes, the goal for us is to add new new new customers right. That's the point of localizing as this product offering and really the aggressive push to develop new products in the marketplace.

Speaker Change: Historically.

Unnamed Speaker: You know, we have been attacking our international sales with, for lack of better terms, a US-based product portfolio that didn't allow for much opportunity in many markets. So we're trying to localize our product assortment, and I think we've done that with our new product launch. And then, in some cases, localized production. So, you know, they're making good headway there. And again, the opportunity for us is to continue to serve our export customers, which we've had great success with, but also drive new organic growth in our focus countries, or focus regions, rather.

Speaker Change: We have been attached.

Speaker Change: Attacking our international sales with just go up for lack of better terms, a U S based product portfolio, which which didn't allow for much opportunity in many markets. So.

Speaker Change: So we're trying to localize our product assortment and I think we've done that with our new product launch and then in some cases localized production.

Speaker Change: So, making making good headway, there and again the opportunity for us is to.

Colin: To continue to serve our export customers, which we've had we've had great success with but also drive new organic new.

Colin: New organic growth in our and our focus countries our focus regions rather.

Speaker Change: Thanks, So much appreciate it guys.

Paul: Thanks, Paul.

Operator: The next question is from Philip Shen from Roth Capital Partners. Please go ahead.

Paul: The next question is from Philip Shen from Roth Capital Partners. Please go ahead.

Philip Shen: Guys, thanks for taking my questions. I wanted to follow up on the price topic. You know, some of our channel checks with some of your customers suggest you may have lowered the price recently to the tune of maybe 5 to 10 percent. I was just wondering if you can affirm or deny, you know, confirm that in any way, and then is this something that might be a one-off, or is it across the board?

Philip Shen: Hey, guys. Thanks for taking my questions I wanted to follow up on the price topic.

Philip Shen: You know some of our channel checks with some of your customers suggest you may have lowered price recently to the tune of maybe 5% to 10%.

Speaker Change: Just wondering if you can affirm or deny confirm that in any way.

Speaker Change: And then is this something that might be one off or is it across the board and then if you're able to maintain margin as you mentioned earlier.

Unnamed Speaker: And then if you're able to maintain margin, as you mentioned earlier, is it because you have, you know, cost-outs that are helping you with that? I know you've had some copper increases here, but you're contracting in such a way that it's all passed through. So, x-ing out, you know, the raw material increases. If you could talk through the pricing, that would be fantastic.

Speaker Change: Is it because you have a no cost outs that are helping you with that I know you've had some copper increases here, but youre contracting in such a way that it's all pass through so exing out you know the raw.

Speaker Change: <unk> increases.

Speaker Change: Can talk through the pricing pricing.

Speaker Change: That would be fantastic thanks, guys.

Unnamed Speaker: Yeah, Phil, I'll answer that pretty simply. Look, we feel that our pricing has remained fairly consistent. No, no huge changes in our pricing strategy in the marketplace. And you hit it on the head will work, you know, basically flowing commodities through our products and, and you know, don't have exposure to commodities with inventory as projects are I'm sorry, inventory raw materials are procured as the project is booked. So yeah, appreciate your channel checks. I'm happy to say, and it sounds like you're hearing, we're winning some projects in the marketplace, but no change to our pricing strategy.

Speaker Change: Yeah.

Paul: Phil I'll answer that pretty simply is look we have a we feel that our pricing has remained.

Phil: Fairly consistent no no huge changes in our pricing strategy in the marketplace and you hit it on the head where we're <unk>.

Phil: Basically flowing commodities through through our our products in.

Phil: <unk>.

Speaker Change: Don't have exposure to commodities with with inventory as projects are.

Speaker Change: Our I'm, sorry inventory raw materials are procured as the project is booked so I appreciate your channel checks I'm happy to say and it sounds like Youre hearing well went on some projects in the marketplace, but no no change to our pricing strategy dynamics.

Philip Shen: Got it. Thanks, Brandon.

Paul: Got it thanks, Thanks, Brandon and Yeah. We have identified you know you guys continuing to do well with bookings he showed that to us today and it seems like bookings could a seller in the back half.

Speaker Change: And you could win share as we got through 'twenty five wanted to just check in.

Philip Shen: And yeah, we have identified, you know, you guys continue to do well with bookings. You showed that to us today, and it seems like bookings could have sold in the back half, and you could win shares if we get through 25. One to just check in, so that's the kind of the bookings kind of front end element. You talked about earlier with the guide down that there wasn't a specific reason. It was kind of an amalgamation of everything that's been happening.

Paul: So that's the kind of the bookings kind of front end element.

Speaker Change: You talked about earlier with the.

Speaker Change: Guide down that there wasn't a specific reason it was kind of an amalgamation of everything that's been happening, but the main change that we've noticed in the market. Since your Q1 call has been in the South East Asia 80, CVD and when we pulled you know 25.

Philip Shen: But the main change that we've noticed in the market since your Q1 call has been the Southeast Asia ADCVD. And when we polled, you know, 25 asset owners, customers of yours, I think 40% of them cited that they pushed out 25 CODs. Most of them cited Southeast Asia as one of the reasons why. So maybe that's coming back to you in terms of module availability. Maybe they're not saying Southeast Asia specifically.

Speaker Change: Asset owners customers of Yours, you know Ah I think 40% of them decided that.

Speaker Change: There.

Speaker Change: They pushed out 25 cod's in up to 40%.

Speaker Change: Most of them cited southeast Asia as one of the reasons why so maybe that's coming back to you in terms of module availability, maybe theyre not saying southeast Asia, specifically just curious if you can give us a little more color as to the guide down is as module availability.

Philip Shen: Just curious if you can give us a little more color as to the guide down here. Is module availability a reason? And perhaps as a result, in Southeast Asia, ADCVDs could actually be one of the key drivers. Thanks.

Speaker Change: A reason and perhaps as a result, southeast Asia 80, CVD <unk> could actually be one of the key drivers. Thanks.

Unnamed Speaker: Yeah, Phil, I think that ADCBD is a driver. It is not a main driver for us, so as we get projects pushed out, we understand the reasons why those are being pushed out. And, you know, a swap to modules also, you know, also incorporates really a redesign of our product, sometimes a minor redesign and sometimes a significant redesign, say if you were moving from bifacial to thin film, right? It is a reason it is not the top reason from the customer feedback that I get and also the design team, which is interacting with our customers every day and working on these projects.

Phil: Yeah Phil.

Phil: I think that 80 CVD is a driver.

Speaker Change: It is not a main driver for us so as we get projects push out we understand the reasons why those are being pushed out.

Speaker Change: You know a swap to modules also.

Speaker Change: You know also incorporates really a redesign of our product, sometimes a minor redesign and sometimes a significant redesign say.

Speaker Change: Say, if you're removing from bifacial to thin film right. So.

Phil: It is a reason it is not the top reason for them from the customer feedback that I get and also the design team.

Phil: That is interacting with our customers every day and working on these projects.

Unnamed Speaker: You know, the prevailing reasons that we've heard more recently are site permitting and interconnection. I mean, those are the big ones, with probably site permitting being the top of the list. So, it is a factor, but it is not the focus of the guide now.

Phil: The prevailing reasons that we've heard more recently is site permitting and interconnection I mean, those are the big ones were probably site permitting being.

Phil: During the.

Phil: The top of the list so.

Phil: It is a factor, but it is not the factor of the guide now.

Philip Shen: Got it. Thanks, Brandon. One last quick one. Do you have a sense for when peak pain on site permitting and interconnection could be? I mean, is it around the corner, or do you think this can persist for, you know, some time?

Brian Lee: Got it thanks, Brian one last quick one do you have a sense for when not a peak pain on site permitting.

Phil: And interconnection.

Speaker Change: It could be I mean is it around the corner or do you think this can persist for some time.

Unnamed Speaker: Yeah, Phil, I wish I knew. Hopefully, it ends soon, right? I mean, with the backlog of permits and interconnections, you know, I think we're in for turbulent times here for the foreseeable future. So, you know, it's a challenge for our customers. It's a challenge for us.

Phil: Yes.

Phil: Phil I wish I'd there hopefully it ends it ends soon right I mean, I think would be with a backlog of permitting and interconnections.

Speaker Change: Well I think we're in for turbulent times here for.

Speaker Change: The foreseeable future so its a challenge for our customers, it's a challenge for us.

Philip Shen: Okay, thanks Brandon. I'll pass it on.

Phil: Got it okay. Thanks.

Phil: Thanks, Brandon I'll pass it on.

Operator: The next question is from Maheep Mandloi from Mizuho Securities. Please go ahead.

Mohit <unk>: The next question is from Mohit <unk> from Mizuho Securities. Please go ahead.

Maheep Mandloi: Hey, thanks for taking the questions here, and I apologize if this was addressed earlier, but I just wanted to understand the gross EBITDA margin or gross margin decline in the guidance for the second half over here. Is this a function of the revenue or volumes here, or any more design work required as customers push out some projects?

Mohit: Hey, Thanks for taking the questions here and I apologize. If this was addressed earlier, but just wondering in a Sunday. The cros are sort of the EBITDA margin on gross margin decline in the guidance for the second half over here is this a function of the revenue or volumes here or.

Speaker Change: Any more design work required does a customer was pushed out some projects here.

Unnamed Speaker: Yeah, thanks, Maheep, for the question. I mean, you know, it's mostly just the leverage on the operation side and leverage on our SG&A expenses. Maybe, Dominic, I'll kick it over to you to... Maybe, maybe give some color to that if you'd like.

Speaker Change: Yes, thanks behave for the question.

Speaker Change: It's mostly just just the leverage on the <unk>.

Speaker Change: On the operation side and leverage on our SG&A expenses guidance.

Phil: Maybe Dominic I'll kick it over to you.

Dominic: Maybe maybe give some color to that if you'd like.

Unnamed Speaker: The only thing I would add is that with some of the projects being delayed, it's kind of difficult on the labor force as we're ramping up to have some of the production capacity ready to deliver for the customers. And when the projects push, we're left with a less efficient workforce than we desire. We called that out in the second quarter.

Dominic: The only thing I would add is that.

Dominic: Some of the projects being delayed it it's kind of difficult on the labor forces, we're ramping to have some of the production capacity ready to deliver for the customers and when the projects push.

Dominic: We're left with less efficient workforce than we desire.

Unnamed Speaker: We're trying to be careful about how we ramp up. We don't want to whipsaw our workforce. But fundamentally, it's between those two factors as we ramp up for production. But these are lower numbers, and so we are losing a little bit of leverage.

Speaker Change: We called that out in second quarter, we're trying to be careful about how we ramp we don't Wanna whipsaw, our workforce, but fundamentally it's between those two factors as we ramping for production, but these are lower numbers and so we are losing a little bit of leverage.

Maheep Mandloi: Good, understood. Just on the buybacks here, and any thoughts or algorithm on how you would kind of exercise those going forward, or what prices?

Speaker Change: Got it understood.

Speaker Change: Oh, just on the the buybacks here and any thoughts.

Speaker Change: Thoughts around go to them on how you would kind of exercise those going forward.

Speaker Change: Oh at what prices.

Unnamed Speaker: Dom, do you want to take that?

Dominic: Dom you want to take that.

Unnamed Speaker: Sure. So, fundamentally, as you recall, the board authorized up to $150 million, but we just wanted to start with some cash on hand. We did a $25 million ASR that's been completed. We believe that we have much better value for the long term for our shareholders in a number of ways, and we want to be very open to looking at things like our organic growth, international markets and expansions, and perhaps M&A.

Dom: Sure. So yeah. The fundamentally as you recall the board authorized up to $150 million, but we just want to start with some cash on hand, we did $25 million ASR that's been completed.

Speaker Change: We believe that we have much better value for the long term for our shareholders and in a number of ways and we want to be very open to looking at things like our organic growth international markets and expansions and perhaps M&A. So I don't want to use up all the dry powder necessarily on a share repurchase clearly you know what.

Unnamed Speaker: So I don't want to use up all the dry powder necessarily on a share repurchase. Clearly, you know, with the stock price trading where it is, we believe it's a long-term disconnect from the value that we believe is happening long-term that we can continue to drive. So I don't think, you know, if we announced something else with the $125 million of share repurchase, we would announce that publicly. But at this point, nothing has been announced.

Dominic: The stock price trading where it is we believe it to long term are disconnected from the value that we believe is happening a long term that we can continue to drive so I don't think if we announce something else with the with the.

Speaker Change: Available $125 million of share repurchase.

Dominic: Would announce that publicly.

Speaker Change: But at this point nothing has been announced.

Maheep Mandloi: Got it. I appreciate that. I'll take the rest offline. Thank you.

Speaker Change: Got it appreciate that'll take the rest offline. Thank you.

Operator: The next question is from Kashi Harrison about Piper Sandler. Please go ahead.

Speaker Change: The next question is from Kashi Harrison from Piper Sandler. Please go ahead.

Kashi Harrison: Good afternoon, and thanks for taking my questions. So my first one, just given the recent guidance revisions, all the market commentary, it's clear that predictability here is deteriorating. And so I was wondering if you'd just give us, you know, the market some color on maybe some initiatives that are underway internally to improve your forecast. I'm just trying to understand what you're doing internally to avoid another, you know, guidance revision when we're back here on this call in November.

Kashi Harrison: Good afternoon, and thanks for taking my questions.

Kashi Harrison: So my first one.

Kashi Harrison: Just given.

Kashi Harrison: Given the recent guidance revisions all the market commentary.

Speaker Change: Clear that predictability here is deteriorating and so I was wondering if you could just give US you know the markets and some color on maybe some initiatives that are underway internally to improve your forecast I'm just I'm just trying to understand what you're doing internally to avoid another guidance revision when we're back here on this call in November.

Kashi Harrison: Okay.

Unnamed Speaker: Cashie, yeah, thanks for the question. And a fair question, right? Again, we're experiencing a volatile market. I know that's extremely frustrating for some people. It's frustrating for us. Challenge to Plan Labor, you know, as Dominic pointed out.

Speaker Change: Yes, thanks for the question.

Speaker Change: Fair question right.

Kashi Harrison: Again.

Speaker Change: We're experiencing a volatile market I know that is that's extremely frustrating it's frustrating for us.

Kashi Harrison: The challenge of plant labor.

domenick: As domenick pointed out.

domenick: Look we are.

Unnamed Speaker: Look, we are touching these projects and touching the EPCs. We've got a process, we're looking at this stuff on a weekly basis and a summary, a summary view on a, on a monthly basis. And we're collecting as much information from the EPCs as we can, including, you know, what panels are using, what trackers they're using, and allowing notice to proceed so that that data is collected in our CRM, and you know, it's reviewed. It's reviewed, as I said, on a weekly basis.

Speaker Change: We are touching these projects touch in the EPC is we've got a process. We're looking at this stuff on a weekly basis and summer summary view on a on a monthly basis and we're collecting as much information from the EPC is as we can including what panels are using what trackers, they're using.

Kashi Harrison: Permitting a notice to proceed so.

Kashi Harrison: That data is collected in our CRM and.

Rich: Rich reviewed.

Kashi Harrison: It's reviewed as I said on a weekly basis. So we're trying to call. This thing as accurately as we can I.

Unnamed Speaker: So we're trying to call this thing as accurately as we can. I think, look, it's not a challenge that is unique to Shoals right now. You know, on-time installs are the lowest we've seen in 18 months, and it's a challenge for us to predict our customers' delays. So yeah, again, I know it's a frustration. It's frustrating for us. We feel good about our revised guidance, um, you know, for the back half of the year, and it's the best estimate we can give right now.

Speaker Change: I think look.

Speaker Change: It's not a challenge that is unique to shoals right now.

Speaker Change: On time installs are the lowest we've seen in <unk> and.

Speaker Change: In 18 months and it's a challenge for us to predict.

Speaker Change: Our customers delays so yeah again, I know, it's a frustration it's frustrating for us.

Speaker Change: We feel good about our revised guidance.

Speaker Change:

Speaker Change: For the back half of the year and as.

Speaker Change: It's the best estimate we can give right now.

Kashi Harrison: Okay, I got it. Fair enough.

Speaker Change: Okay got it fair enough fair enough.

Speaker Change: Just just for my follow up question.

Speaker Change: I think you've indicated that quote.

Kashi Harrison: And just for my follow-up question, I think you indicated that quotes or quoted value is up, I think, maybe like 50% year-over-year. How do you explain the gap between quotes being up year-over-year and orders being down year-over-year? Is that just a time lag?

Speaker Change: Quotes are quoted value was up I think maybe like 50% year over year.

Speaker Change: How do you explain the gap between quotes being up year over year, but orders being down year over year is that is that just the time lag is there some other explanation that'd be elections or.

Unnamed Speaker: Is there some other explanation, the elections? What's going on there? What's the story there? Yeah, look, it's just the elongation of these

Speaker Change: What's going on there what's the story there yes look it's just the elongation of these project cycles right.

Unnamed Speaker: Yeah, look, it's just the elongation of these project cycles, right? You know, that much has been consistent here in the last couple quarters. We've talked about it. You know, when we think about when we have a project identified to the time it takes to get to an awarded order status and then awarded order to actual purchase order or backlog in our terms. There is an elongation to that, you know; it is a change to the environment.

Speaker Change: That that much has been consistent here the last couple of quarters, we've talked about it when we think about.

Speaker Change: When we have a project identified to the time it takes to get to an awarded order status and then awarded order too to actual purchase order of backlog in our terms.

Unnamed Speaker: I think, long term, it's not necessarily a terrible thing because we've got, you know, better, better visibility, longer visibility, although it is somewhat volatile right now, we at least have visibility into these projects. So quote volumes are up. And then also, again, our backlog and awarded orders, if you think about from a year over year period, a period standpoint, are up 18%. Again, it's just that conversion from awarded orders to revenue.

Speaker Change: There is an elongation to that.

Speaker Change: It is a change to the environment I think long term, it's not not necessarily a terrible thing because we've got you know.

Speaker Change: Better better visibility longer visibility, although it is somewhat volatile right now we at least have the visibility to these projects. So quote volumes are up and then also again our backlog and awarded orders. If you think about from a year over year period to period standpoint are up 18% again, it's Jim.

Jim: That that conversion from awarded order to revenue.

Jim: I appreciate it thank you.

Speaker Change: Thank you.

Operator: The next question is from Donovan Schafer from Northland Capital Markets. Please go ahead.

Speaker Change: The next question is from Donovan Schafer from Northland Capital markets. Please go ahead.

Donovan Schafer: Hey, guys. Thanks for taking the questions. So first with.

Donovan Schafer: With the 12% in the international backlog I know that you know, there's a longer conversion time, there, but just kind of.

Donovan Schafer: trying to anticipate what that could look like. And I think you've provided some commentary on this before, but can you remind us, is it tending towards combiner boxes or more towards BLA type? And I know even with combiner boxes, you know, you guys can have that be a system sale. So is it more of a design system sale or more of a component sale? And is it more of the combiner box variety or more of the BLA variety? If you can just unpack that,

Donovan Schafer: Turning to anticipate what that could look like and I think you've provided some commentary on this before but can you remind us is it tending towards combine or boxes or more towards the BLA type and I know like even though the combine their boxes you guys can have that be a system sale. So is it is it does that.

Speaker Change: <unk> system sale or more component sale and is it more of a combine or box variety of more of the deal are if you can just unpack that that'd be great.

Unnamed Speaker: Yeah, hey Donovan, I would classify our backlog of awarded orders internationally is more of a solution sale than less. You know, we're not going to get project-to-project specifics, but they are, for the most part, solution sales. And our solution is the sales primarily combiner box.

Speaker Change: Yeah, Hey, Doug none of them.

Doug: I would classify.

Speaker Change: <unk>.

Speaker Change: Our backlog and awarded orders internationally.

Speaker Change: More of a solution sale than less.

Speaker Change: You know, we're not going to get a project to project specifics, but they are for the most part solution sales.

Speaker Change: Okay.

Speaker Change: Element really combine or box.

Unnamed Speaker: Now, when we talk about a solution sale, those, for the most part, would include BLA in this case. And they aren't a custom-created sale. Yeah, I mean, they're not a component sale. They're custom-engineered sites. I would say a full solution is probably a good way to characterize those.

Speaker Change: So when we talk about a solution sale that those for the most part what would include BLA on this in this case and then on a custom.

Speaker Change: Customer journeys.

Speaker Change: They're you know, they're not they're not a you know.

Speaker Change: <unk> sell their cup.

Speaker Change: Custom engineered sites in.

Speaker Change: I would say a full solution is probably a good way to characterize this.

Donovan Schafer: Fantastic. That's good to hear.

Speaker Change: Fantastic that's good to hear.

Speaker Change: And then as a follow up you talked about.

Donovan Schafer: And then as a follow-up, you talked about, you know, regaining customers where you had lost some wallet share. And I'm curious if you could clarify when you say that sometimes when we talk about wallet share, it's about, you know, how much of the wallet share you get for a given project, say, like a gigawatt project. You know, you could say, well, gee, we lost WalletShare because we still won the project, but we didn't get, you know, maybe the wire management solution included.

Speaker Change: You know regaining customers, where you had lost some wallet share.

Speaker Change: And.

Speaker Change: I'm curious if you could.

Speaker Change: Clarify when you say that you know sometimes they talk about wallet share that's about how much of the you know for a given project.

Speaker Change: A gigawatt project.

Speaker Change: No you can say well Gee, we lost wallet share because we still won the projects, but we didnt get you know maybe the the wire management solution included or something or is it a case, where you actually were not winning as many projects with a particular customer and so it's sort of almost had a market share component to it.

Donovan Schafer: Or is it a case where you actually were not winning as many projects with a particular customer, and so it sort of had a market share component to it? And if you can describe what you did to win that back.

Speaker Change: And if you can describe what you did to to win that back.

Unnamed Speaker: Yeah, great, great question. Your characterization of wallet share, I would say both of what you describe are true. You know, you asked about international projects.

Speaker Change: Yeah, Great Great question.

Speaker Change: Your characterization of wallet share I would say both of what you described are the case.

Speaker Change: How are you asked about the international projects our goal our sales team's goal is to sell the total solution right. So anytime we're not selling the total solution we.

Unnamed Speaker: Our goal, our sales team's goal, is to sell the total solution, right? So anytime we're not selling the total solution, we want to move the customer up the value continuum and sell that total solution. So that is one part of it. The other part is the amount of spend we're getting from our EPC customers, whether that's, you know, 10 or 20%, 30%, 50%. We want to grow; we want to grow with them to make sure that we are doing more and more projects each year.

Speaker Change: We want to move the customer up the value continuum and sell that total solution. So that is one part of it. The other part is the you know the amount of spend we're getting from our EPC customers, whether that's you.

Speaker Change: You know 10, or 20%, 30%, 50%, we want to grow we want to grow with them to make sure that we are doing more and more projects. Each year. So it is it is absolutely the case.

Speaker Change: Both situations.

Speaker Change: Is.

Unnamed Speaker: So it is absolutely the case. And, you know, both situations. As it relates to what we have done, I think I mentioned in previous calls about us adopting this sales pod structure. I don't think that that's probably a new terminology to anybody out there.

Speaker Change: As it relates to what have we done I think I've mentioned in previous calls about us adopting this sales pod structure I don't think that that's probably.

Speaker Change: New terminology tip to anybody out there it is us having a distinct team.

Unnamed Speaker: It is us having a distinct team of folks that are cross-functional here at Shoals to serve our EPC customers. So we've got broader touch points within the customer base. We're freeing up our account executives so they can have more frequent touch points and also grow with new customers. You know, cold calling on new customers and growing our business and attacking that 30% of the total available market that we may not have been serving in the past.

Speaker Change: Of folks that are cross functional here at shoals to serve our EPC customers. So we've got broader touch points within the customer base.

Speaker Change: We're freeing up our account executives. So they can have more frequent touch points and also grow with.

Speaker Change: With new customers.

Speaker Change: Cold, calling on new customers and growing our business and attacking that 30% of the total available market that we may not have been serving in the past.

Unnamed Speaker: And I think that fundamental change is what is driving the $130 million in backlog and awarded orders with customers where we saw wallet share decline. So I like what I'm seeing. I like the fact that we're seeing orders for the new EPC that we announced in the first quarter, and we signed another supply agreement with an EPC in the second quarter, which was great. So, you know, good progress is being made on the commercial side, there's no doubt.

Speaker Change: And I think that fundamental change is what is driving the $130 million of backlog and awarded orders.

Speaker Change: You know what.

Speaker Change: With customers, where we saw wallet share declines so I like what I'm seeing a like a like the <unk>.

Speaker Change: Fact that we're seeing orders with the new EPC that we announced in the first quarter and we signed another supply agreement with an EPC in the second quarter, which was great. So you know good.

Speaker Change: Good progress being made on the commercial side, there's no doubt.

Unnamed Speaker: This concludes the question and answer session. I would like to turn the floor back over to Matt Trachtenberg for closing comments.

Speaker Change: This concludes the question and answer session I would like to turn the floor back over to Matt tracking Burke for closing comments.

Matt Trachtenberg: Thank you, Sachi, and thank you to our audience today for joining us today. If you have any additional questions, reach out to investors at Shoals.com. We're happy to help you. And finally, everyone is always welcome to join our live webcast of our Investor Day on September 5th. That can be accessed on our IR website at investors.shoals.com.

Speaker Change: Thank you Saatchi and thank you to our audience today for joining us today.

Speaker Change: If you have any additional questions reach out to investors at Shoals Dot Com, we're happy to help you and finally, everyone as always welcome to join our live webcast of our Investor Day on September 5th that can be accessed on our IR website at investors Dot <unk> dot com have a great day everyone.

Speaker Change: Yeah.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Uh huh.

Speaker Change: [noise].

Speaker Change: Okay.

Speaker Change: [music].